Stocks rebound; Nasdaq erases late swoon

WilliamL. Watts

NEW YORK (MarketWatch) — U.S. stocks ended with broad gains Monday, reclaiming some of the ground lost in the previous week as investors took their cue from an unexpectedly strong rise in March retail sales and consensus-beating results from Citigroup Inc.

Stocks wobbled in late trade, with the Nasdaq briefly dipping into negative territory before regaining its footing. In the end, the Nasdaq Composite
COMP, -0.01%
rose 22.96 points, or 0.6%, to close at 4,022.69.

Despite the Monday bounce, stocks may be poised for further losses in the near term, strategists said, particularly as earnings season progresses under a cloud of anxiety over valuation levels.

“There’s no telling how long the current bout of volatility will last, or how deep the pullback will go. But if history is any guide, markets may overshoot on the way down,” said Jerry Webman, chief economist at Oppenheimer Funds, in a note.

With no 2008-style systemic crises or wild, 2000-style valuation concerns and subsequent recessions currently on the horizon, Webman said that a significant selloff is likely to be “relatively contained—and prove to have been a good long-term buying opportunity.”

A positive tone had been set ahead of the opening bell as stock-index futures extended gains after data showed retail sales jumped 1.1% in March, marking the biggest rise since September 2012 and topping forecasts for a gain of 0.9%. February sales were raised to show a 0.7% gain from an initial estimate of 0.3%.

“Significant strength in consumer spending last month provides a strong challenge to the bearish tone of late – not that much of the bout of selling was driven by concern for the health of the economy,” said Andrew Wilkinson, chief market analyst at Interactive Brokers in Greenwich, Conn.

The data cheered investors as it offered some reassurance that soft economic data earlier this year was attributable to extreme winter weather.

“The amelioration of the chilly winter possibly had much to do with the latest reading, but the snapback in dollars spent was tremendous,” Wilkinson said, in a note.

U.S. stocks were shellacked last week, with the S&P 500 and Nasdaq both seeing their biggest weekly losses since mid-2012, while the Dow saw its biggest weekly fall since mid-March.

The relatively upbeat results from Citigroup stood in contrast to disappointing results Friday from J.P. Morgan Chase & Co.
JPM, -0.74%
which contributed to the Friday selloff. Analysts said earnings and, perhaps more important, sales results continue to hold the key to near-term direction, particularly in the tech sector, which has been hardest hit as investors grow worried that valuations have been stretched too far.

“Weak sales growth is nothing new, but now that the market appears to believe that valuations are looking rich, investors are starting to take notice. If companies can’t beat sales expectations in an environment of low interest rates, when can they?” wrote Kathleen Brooks, research director at Forex.com in London. See: Google, Intel, IBM outlooks to trump earnings results.

Kiev orders troops east as pro-Russia forces extend grip

(3:41)

Pro-Russian activists and militants extended their grip across eastern Ukraine, prompting the government to mobilize the military as it struggled to prevent a replay of Russia's takeover of Crimea. Greg White reports. Photo: AP.

Elsewhere, shares of Herbalife Ltd.
HLF, -1.14%
rose 4.4%. Shares had tumbled at the end of last week on news reports the company is the subject of a criminal investigation by U.S. authorities. The nutrition-supplement firm said Friday it wasn’t aware of a probe.

Shares of Edwards Lifesciences Corp.
EW, -0.61%
rose 11%, making it the top gainer in the S&P 500. The company said late Friday it won a preliminary injunction limiting the sale of Medtronic Inc.’s
MDT, +0.14%
CoreValve system, which had been found by a federal jury to infringe on an Edwards patent. Medtronic shares fell 1.9%.

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